Prague’s Opencard Debacle and City Hall’s Blind Faith

Blind faith is welcome in rare circumstances. Definitely not welcome in very costly but very questionable city programs. Yet that’s what Prague’s elected officials have in their pet project Opencard: blind faith despite signs that the project is at best a waste and, even worse, could enrich private pockets at the expense of the taxpayer.

Recently we’ve written here about the worsening condition of finances at Prague city hall, cuts to services and loss-making programs. At issue currently is Opencard, a failed city hall program that should “simplify” buying transit passes, offer discounts at stores and museums and other services, but completely fails to generate any profits and has already drained 30 million euro from the city budget.

The city originally billed Opencard as a near-universal payment card that could be used not only for city services, but also at shops, restaurants and as a payment card. Nothing has materialized except for use as a transit pass in city limits, payments at the library and in some municipal parking places. These three uses can be done via standard means at no additional cost to the tax-payer, and none of the promised additional uses have materialized. Yet the program continues to run up massive bills for operation, improvements and maintenance while city officials are intensifying its promotion. Sadly, this comes as the same city officials are slated to cut basic transit service due to a lack of cash to pay the transit companies.

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Prague deputy mayor Milan Richter

Thursday night a Prague deputy mayor, Milan Richter, was on TV tirelessly promoting the Opencard project. Richter takes official responsibility for the more than one-year-old project next month.

Strangely, rather than seek out whether the loss-making program is worth saving or eliminating, Richter has seemingly blind faith in the project and says he has no doubt the program is good. In fact, he says it should be rolled out throughout the country.

On the television program, the host and viewers asked many questions about potential improprieties in the project, about corruption and whether Richter would be willing to resign if the program under his watch continues to be a very serious drain on public finances. The savvy politician avoided the questions and instead returned to his talking points how Opencard needs to be ramped up and not scaled back.

Aren’t highly placed city officials supposed to be watchful of spending, especially at a time when cuts to basic services are gaining pace? Yet Richter says more people should use Opencard and that more discounts to goods and services will be available via the card.

But if the city’s ballet, museums, parks or transit system are supposed to give discounts to Opencard users, who’s going to make up the lost revenue? So far, the losers are likely to be Prague’s libraries, bus drivers, commuters and schools as the city’s budget gets scaled back.

It’s simply cheaper and faster to buy transit passes in their standard form, and putting a coin into a parking meter is easier than finding one of the few places to top up your open card. And it doesn’t cost the city anything extra.

Richter never mentions who’ll pay for all the discounts that have yet to materialize, but in the television interview he did say that eventually, under his management, Opencard will become profitable.

Dow Jones put questions to Haguess, the company that built the Opencard system and currently runs its central operating system. Press representative Petr Stransky curiously said “it isn’t common that municipal cards projects generate profit…I don’t understand how such a project could be profitable.”

Richter also said the card will eventually do what it should have done from the beginning, be a universal payment card. Even though city hall has Haguess running the system, Stransky said the payment features are not available, therefore neither Haguess nor anyone else is responsible for putting it into operation.

The Czech central bank Friday confirmed that Haguess is not registered as having been granted authority by the central bank to operate a payment system. So despite Richter’s comments that he will turn Opencard into a payment card, it’s impossible unless the city finds a new contractor that has central bank approval or a banking licence to manage the payment system.

The natural question is if anyone at city hall — especially those promoting this costly program — could reap undisclosed benefits from the fact Haguess has the Opencard deal.

City officials in recent past have denied any wrongdoing, and in the television show, when asked whether there is corruption at city hall, Richter said perhaps there could be some. We called Richter’s office at city hall to ask whether he has any connection to Haguess. He wasn’t available and has not yet returned our call.

Comments (1 of 1)

The real issue at the moment is not so much whether it generates profit, rather the excessive costs and their untransparent nature. You mention Haguess, but its worth pointing out that this company has no previous track record in anything, let alone having a licence for payment systems. Then there is the 250m CZK 'marketing budget. This amount is far bigger than the annual budget for the biggest Czech beer brand with national TV advertising. Nothing like such campaigns have appeared. What has the marketing money been spent on, and who authorised such a ridiculous amount in the first place?

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